Prague office market green leader and solid leasing performance
At the end of Q1 2012 the class-A and B office stock in Prague totaled 2,814,000 m², which means that the Prague office market is – after Warsaw and Budapest – the third largest in CEE.
In the first quarter 2012 there were two new office buildings completed in Prague – Keystone in Prague 8 and B3 Pankrác in Prague 4 – which brought nearly 29,000 m² of new office premises to the market.
At the end of March 2012, there was 178,000 m² under construction, out of which nearly 83,500 m² should be delivered to the market by the end of 2012. In total, 112,000 m² of new offices should be added to the Prague market which means 12% more than last year, but definitely below the 10-year average (163,000 m²).
“A focus on sustainability both in terms of construction as well as its operation unifies nearly all newly developed office projects. There are 368,000 m² of offices in Prague which have already obtained or are currently working on environmental certification.
“Thanks to this , Prague is currently the capital with largest number of completed green office buildings in CEE. The situation on the market definitely favors green buildings, meaning whoever is not building green definitely loses in the eyes of high-profile tenants as well as international investors,” says Eduard Forejt, Head of Office Agency at Jones Lang LaSalle Prague.
He adds: “Branches of international companies are committed to decreasing their carbon footprint, which of course shortens the list of potential seats only to the buildings which monitor and decrease their environmental impact.
“As evidence I would use the most recent biggest office leasing transactions in Prague: PricewaterhouseCoopers and GlaxoSmithKline in the City Green Court (Prague 4) and Ernst & Young in Florentinum (Prague 1), where the green certification (green precertification) played an important role in the final decision making process.”
“As far as office leasing activity is concerned in the last 12 months (Q1 2011 – Q1 2012), Prague has been the fourth most active market in the European perspective. Prague has witnessed a 30% increase in the office leasing volume. Following the worsened economic forecast, we expect a slow-down in office leasing again.
“This year we are unlikely to reach the 2011 gross take-up volume (which was 325,000 m² in Prague last year), we expect a drop by approximately 15 to 20%, however office leasing in Prague will remain well above the long term average this year. No doubt, there is certainly a positive signal; up to 65 to 70% of all office space currently under construction has been already preleased to particular companies,” says Ondrej Novotny, Head of Research at Jones Lang LaSalle Prague, adding “therefore we expect a further decrease in the average vacancy rate from 12.26 % (Q1 2012) to approx. 11.75 – 11.80 % (in Q4 2012).”
“Renegotiations formed 30% of all office leasing transactions in Prague last year. Besides mergers and expansions beyond the available space another frequent reason for moving somewhere else is down to poor services provided by the landlord to its tenants. A higher quality of service in the last year before the lease contract terminates usually doesn’t improve the relationship between landlord and tenant. Therefore landlord´s focus during whole lease contract period is the key for successful lease prolongation,” says Forejt.